So close, Rob. Just measured my bikes at 8.5" for that same dimension, CP-1 rack to top of decaleur tubes. I use a GB28 size bag and get good fit with this 8.5 inches without any of the flop-over onto the fender that Evan's photos show. For comparison's sake, the decaleur pin rail on my GB28 is attached even with upper edge of the leather bag-top strip, and the lid of the bag pretty even with the bars.
To your question I was going to recommend going with the larger GB28 size until Evan posted his photos which is really helpful if you wanted to avoid the flopover effect onto the fender. I guess it matters what inside the bag is leaning on the fender, like you wouldn't want a heavy tool kit leaning on and bouncing on the fender. Perhaps that half inch difference between 8" and 8.5" is enough to make the difference but Evan's bag is also leaned forward a bit, which also encourages that spill over, and the CP-1, a great rack, is pretty short compared to a Nitto 32f or VO Randonneur.
At the same time, I think Evan's set up looks great, and according to Rebour drawings and photos from Golden Age, etc, this is the way it was often done in those years when this front-back-on-rack/dec was established. That leaned forward bag touching fender looks almost standard in old photos. Not saying that's a reason to use it--you'd choose if for functional preference I think--but just saying aesthetics (as you mention) may be not a reason to avoid it per se.
Aside from the specific bag-fit questions, there may be a question which size to go with if you could use either equally well. I used a GB25 for the first few years I road with front-bag and then switched to GB28. Couple reasons to go with the larger bag if it works out and if you like it. The larger 28 bag seems like it has no drawback compared to the 25 if both work, what tiny extra weight there would be is mainly an inch of cotton duck. There seems to be no difference to me in how the two bag sizes affect wind while riding, cross-wind, etc. I had but the 28 and 25 available to me for a year of riding and when I'd start a ride with the 28 mostly empty I'd think "i should have put the 25 on instead," but while riding, and if I did switch to the 25 for the next ride, I could feel no difference in the wind, from front or side. The GB28 (or another larger bag) is on my bike for every ride, usually mostly empty and doesn't affect handling. I got the GB25 early on when I thought a front-bag would be a nuisance and it should be below the bar, but as I've learned better, I prefer the bag even with or a little higher that bar top. I also regularly use a OAC Docena (Swift made) that is a bit higher than my bars and I realized it feels right that way, gives me the most load-carry versatility (and looks right to me too). This only become more true as a GB bag breaks in over the years and miles, becomes more rumpled and faded, and develops its own inevitable sag. It still holds as much as it does when new and perky, but after a few years an unloaded GB28 looks smaller than it does new.
Here is an idea to consider for your situation, and apologies if it breaks too many decaleur rules. I recently built up a Jack Taylor I'd had in storage too long, and adapted the CP-1 rack to work with the braze-on Racers. Because Racer pivots are a little higher on the fork than Raid/RH CP pivots, the CP-1 sits a little higher in the rear and slopes down a little toward the front in order for the CP-1 legs to reach. (I've found no functional problems with this, the remedy to get it level would require a custom rack, and in the meantime this CP-1 is already bent to that shape, so that's what I'm going with for the time being.)
Because the rack on the Jack Taylor is higher in the rear than designed (and also due to Jack Taylor's fit), this bike had only 7" from rear rack deck to decaleur top installed the usual way. When I popped the GB28 into the decaleur for first ride, the pins didn't go all the way in. I set up a decaleur to support no weight at all, theoretically, but this 1.5" too low dec didn't support the bag side-to-side or front-to-rear very well. It occured to me to try the decaleur tubes pointing up instead, and it put them at exactly 8.5" and now supports the GB28 in the usual way. The bag lid sits a little higher than bar level, but in a way that looks right to me, and works well. The attached Jack Taylor photo doesn't show the decaleur fully but you can see the tubes are not hanging down where you'd expect them.
Mitch